Government Fund Weekly News Roundup — SWFs Target Tech Startups

January 15, 2016 by Loch Adamson

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Unicorn The Scottish Unicorn at London's Hampton Court Palace

This week: Government funds provided capital to innovative startups in India and Scotland. A private-equity firm backed by China Investment Corp. completed its first deal in Germany. And the Netherlands’ PGGM agreed to a $2.5 billion securitization trade. 


Unicorns

An intrepid government fund travelled north to snowy Scotland this week, questing after unicorns — i.e. high—growth technology startups.

Malaysia’s $35 billion sovereign wealth fund Khazanah Nasional was among a group of investors that came together to provide capital for Edinburgh-based technology company Skyscanner, which runs a flight-cost comparison website. The financing round valued the Scottish startup at $1.4 billion, earning it so-called unicorn status — the designation given to firms apparently worth more than $1 billion prior to their flotation on the stock market.

Khazanah, which opened an office in the Shard skyscraper in central London in October 2015, has been looking to source more direct investments in the U.K. and Europe — even as the Malaysian government encourages the country’s state—owned organizations to spend more at home to boost the domestic economy.

Apparently unicorns exist in India, too. Singapore's $343 billion sovereign fund GIC has led a fundraising round for online retailer Shopclues, which is valued at 73 billion rupees ($1.1 billion). GIC is reported to have invested about $80 million, which the Gurgaon-based firm will use to expand its operations across India. GIC has previously invested in Shopclues' largest rival in the Indian e-commerce sector, Bangalore-based Flipkart.

Used Cars

GIC’s Singaporean peer, $194 billion state investor Temasek Holdings, also invested in India this week. Temasek teamed up with Silicon Valley venture capital firm March Capital Partners and New York-based private equity firm Warburg Pincus to participate in a $145 million capital-raising round for online automobile classifieds company CarTrade.

Mumbai-based CarTrade is no unicorn, but it is an increasingly influential player in the fast-growing used-car listings business. The company will deploy its latest capital injection to acquire its rival CarWale from German media conglomerate Axel Springer for $100 million and to fund further expansion. 

CIC in Germany

Government funds continue to seek access to investment opportunities in Germany, Europe’s largest economy. On Tuesday, Munich-based Asia-Germany Industrial Promotion Capital (AGIC), a private equity fund in which the $747 billion China Investment Corp. (CIC) is an anchor investor, completed its first deal.

AGIC teamed up with two Chinese state-owned firms — China National Chemical Corp. and Guoxin International Investment Corp., a unit of infrastructure investment firm Guoxin Tendering Co. — to acquire Munich-based machinery manufacturer KrausMaffei Group for €929 million ($1 billion). The seller was Toronto—based private equity firm Onex Corp.

Ex—Deutsche Bank executive Henry Cai founded AGIC in 2015, when CIC contributed to its initial fundraising of $550 million. Cai’s fund provides a platform for Chinese firms to invest abroad, supporting the Beijing government’s stated "Go Out" policy.

CIC appears to be particularly keen on German investments. In mid-2015 it teamed up with the $621 billion Abu Dhabi Investment Authority (ADIA) and other institutions to acquire Bonn-based motorway station group Autobahn Tank & Rast for a reported €3.5 billion.

PGGM’s $2.5 Billion Securitization Deal

Low bond yields are compelling large institutional investors to get creative with their fixed-income portfolios. The latest deal from Netherlands-based cooperative PGGM is a case in point.

PGGM, which oversees investments worth more than €186.6 billion for several Dutch pension funds, has agreed to make a €2.3 billion trade to insure loans made by Spanish bank Santander. Under the terms of the so-called synthetic securitization deal, PGGM will sell credit insurance against potential losses on 6,000 Santander loans to small- and medium-sized enterprises. PGGM said it was acting on behalf of Dutch pension fund Pensioenfonds Zorg en Welzijn (PFZW).




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